Ghost vs. Dropshipping: What is the Better Choice?
The better option between the two is dropshipping. You are in a position of control as a dropshipper, while you are at the mercy of your business partners if you do ghost commerce.
I have done both, and more. With my experience, I can say without hesitation that dropshipping is easier to operate and scale.
Today, I will cover:
- Advantages of dropshipping
- Key differences between ghost commerce and dropshipping
- Profitability calculation between ghost commerce and dropshipping
By the end of this article, I am confident you should be able to decide between these two business options.
Key Takeaways:
- Dropshipping is more profitable than ghost commerce
- While it may seem ghost commerce is cheaper, it gets more expensive over the long run
- Dropshipping is easier to scale, and you have more options on how to run your business
Let us start!
Ghost Commerce and Dropshipping Definitions
Ghost commerce is a business that encompasses many things. It refers to any business that has no physical location.
On top of that, here are the characteristics of ghost commerce:
- No inventory
- Little to no capital
- You do not manufacture the products
In ghost commerce, you are taking advantage of selling what is already there. You can also function as a conduit or middleman between the buyer and the seller.
In this regard, we can consider Uber as a ghost commerce. Although Uber has physical locations or offices, they do not own a fleet of cars.
With Uber, the driver and his car or service are the product. The rider is the buyer. Uber merely facilitates the transaction between the driver and the rider.
Ghost commerce works in the same way. You do not sell your product. You do not manufacture them, either. You only sell them on your social media accounts or in an online store.
Dropshipping, on the other hand, is a much more specific type of e-commerce. With dropshipping, you open an online store and sell someone else’s products.
Once a customer makes a purchase, you order the product from your supplier. Then, the supplier ships the item to your customer.
Dropshipping, over the years, has also evolved. Today, you can do the following:
- Traditional dropshipping
- Private label or white label dropshipping
- Print-on-demand dropshipping
Overall, ghost commerce is an umbrella term that covers all businesses that meet the criteria for it. Dropshipping is merely a form, or a type, of ghost commerce.
Why is it called “ghost?” A ghost is a spirit and is not typically visible. I understand how it sounds: it seems like there is a negative connotation to it.
Ghost commerce is legit. It does not disappear. It’s just that the “real” owner of the business is invisible. What the people “see” is the conduit, or the ghost commerce seller, not the real merchant.
Which is More Profitable: Ghost Commerce or Dropshipping?
Since dropshipping is a form of ghost commerce, let us pick its most common form, affiliate marketing, and compare it against dropshipping.
Affiliate marketing is a process where you promote someone else’s products. In this promotion, your viewers that it is not your product. In dropshipping, however, you make it appear like your merchandise is yours.
Most affiliate marketers promote products listed Amazon, and then some promote digital services, such as Shopify.
When an affiliate marketer promotes a product, the viewer:
- Clicks on a link
- Goes to the merchant’s website
- Buys the product or service
After this, the affiliate marketer gets a commission. The question is: how much? Here is a screenshot of what Amazon offers:
Let’s take a closer look at the highlighted part. If you sell a product that belongs to that category, your commission is 10%.
Now, here are some products from that category:
If you manage to sell the fourth product from the left, which costs $79, you get a commission of 10%, which is $7.90. If you sold the first one, your commission is $2.40.
As you can see, your earnings will heavily fluctuate according to the product you promote. In addition to this, not all products have the same commission rate.
Here is another problem: cookie duration is only 24 hours.
Cookie duration refers to the time with which a sale is attributed to you. For example, if a potential buyer clicks your link, but it takes more than 24 hours for this buyer to complete the checkout, that commission is no longer yours. The good news is that for most digital products, the cookie duration is usually around 30 days.
Now, how about dropshipping? How much money will you earn? Well, there is no limit to it. You also have the power to decide what to sell and for how much. What you can do is choose a profitable niche that has low competition.
Print-on-demand (POD), for one, is highly profitable. Here, you design blank products and sell them in your store. Here is an example:
This mug used to be blank. The designer added the zombie image and text. For the price, here is how the profitability looks:
As you can see, the production cost of this coffee is $5.52. It means that the dropshipper will pay the supplier $5.52, and this payment is for the mug and the printing service.
The customer will pay $19.99, giving the seller a profit of $14.47 for each mug. The shipping fee is not yet included in the selling price.
As a dropshipper, you are in complete control of how much you want to sell the item for. It is also up to you to offer free shipping or not.
In Amazon affiliate marketing or ghost commerce, you make $7.90 per sale. With POD dropshipping, you make $14.47 per sale, and you can make even more.
Between the two, dropshipping is a better choice. As far as pricing and profit goes, you are in control. In affiliate marketing, the seller can reduce the price in half, which means your commission will also be sliced in half.
Types of Ghost Commerce
There are several types of ghost commerce businesses that you can choose from, and all of them require little capital.
Of course, we will no longer include types like Uber, Lyft, or DoorDash. The best ones for online entrepreneurs are:
- Print-on-Demand
- Affiliate marketing
- White-label and private-label
- Reselling
Let us look at each of them.
1. Print-on-Demand
Print-on-demand or POD is a business where you choose blank products, design them, and sell them. You do not need to pay for inventory.
What happens here is that you sign up for an account on a POD system, like Printful or Printify. After signing up, you pick a product and then upload your design. It looks like this:
From here, you transfer the product to your online store. Here are the fulfillment steps:
- A customer buys from your store
- You place the order in the POD system
- The supplier gets notified
- They print the product
- They ship the product to your customer
Your profit is the difference between what you paid the supplier and how much you sold the product for. Please refer to the screenshot I posted earlier.
The beauty of POD is that the system offers thousands of products. The top-selling ones are shirts, mugs, and hoodies.
Again, you will not pay for your stock. Your store display is just a mock-up (a fake rendition). You only shell out money once a customer already placed an order.
2. Affiliate Marketing
Affiliate marketing can be lucrative, but you have to choose products that have a high commission rate. In addition to this, the best products to promote are those that have recurring commissions.
Today, most affiliate marketers are on YouTube, Twitch, or TikTok. Video is now the king of content, so most influencers use these platforms to promote.
Here is an example of an affiliate link:
If you click that highlighted link, you will be directed to Shopify. What you did not know is that if you sign up for a paid plan, the system knows you came from this link.
The Shopify affiliate system can identify the promoter. In this case, it is the YouTuber. If you subscribe to a Shopify plan, the YouTuber gets a commission.
3. White-label and private-label
White label is a process where you order in bulk from a manufacturer of a product, like lipstick. They will manufacture it in packages that carry your brand name.
Private label is the same, but it is your lipstick formula and design that the manufacturer will follow. They cannot manufacture this same product for other people.
Although both are done wholesale, there are now many, manufacturers who do it in retail, which means you only pay if there is an order.
The best example of a private label I can provide is Nike. They do not manufacture their shoes. Instead, they have laboratories where they develop new materials for their products.
Once they have a working prototype, they will share this formula with the manufacturer, most likely in China. Then, the manufacturer would make thousands of pairs. It is not Nike that manufactured the pair of shoes, it is the private-label manufacturer or supplier.
4. Reselling
Finally, there is what we call reselling, which usually is a deal between a company and the real provider. One good example I can provide is the reselling of web hosting.
Let us say that I founded a company called Hosting ABC. I sell hosting services for websites. What my customers do not know is that I do not really have servers.
My customers are using the servers of Namecheap. However, in their eyes, Hosting ABC is their website hosting provider.
Ghost Commerce vs Dropshipping Comparison
In this section, we’ll take a closer look at the difference between ghost commerce and dropshipping. This information should help you decide which one is a better choice for you. As far as ghost commerce is concerned, we will put a strong emphasis on affiliate marketing.
Here are the points of comparison:
- Product Types
- Profitability
- Skill Requirement
- Scalability of the Business
- Cost to Build or Start
Let us begin.
1. Product Types
Both ghost commerce and dropshipping offer a wide range of products to choose from. The only advantage of ghost commerce is you can promote digital products.
For example, with ghost commerce, you can offer hosting services, Shopify or website building services, and other software-as-a-service products.
Dropshipping, however, opens more doors for opportunities, and there are more products to sell. Just go to AliExpress and you will find millions of products there.
Here are some examples of products you can offer with dropshipping:
- Fashion and clothing
- Food supplements, health products, and gym equipment
- Toys and games
- Home décor
- Posters and mementos
- Mugs and bottles
The big difference between the two is that in dropshipping, it is easy to find a supplier. For affiliate marketing, do not be surprised that most sellers do not offer an affiliate marketing program at all.
Between the two, dropshipping is the winner. The number of ghost commerce products you can offer pales in comparison with dropshipping.
2. Profitability
Earlier, we demonstrated that dropshipping is much more profitable than ghost commerce. I’d like to add that on top of the profit margin per product, you are also in control of how you want to increase sales.
In dropshipping, there is this thing we call average order value or AOV. It is the average amount of money that customers spend in your store.
For example, let us say you have two customers. One spent $100 and the other $50. In this case, your average order value is $75.
That math is $100 + $50 = $150. Divide $150 by two (two customers), and you get $75.
What you want as an entrepreneur is to increase this AOV, which means that customers will spend more money.
You can do this by bundling products together, putting up a sale price that people cannot resist, cross-selling, up-selling, and many more.
In dropshipping, you are in complete control to increase your AOV. In ghost commerce and affiliate marketing, you depend on what the sellers do.
3. Skill Requirement
Ghost commerce requires much more skill than dropshipping. Why? Promotion requires credibility, which you have to build over a long time.
For example, let us say that you are promoting Shopify, and you are an affiliate. The thing is that people will not even bother clicking your link if they do not trust you.
While credibility is also important in dropshipping, you do not have to show your face. In dropshipping, you can build credibility by:
- Writing blogs
- Creating ads
- Having a professional-looking website
- Being transparent
- Using trust signals
Your store can look credible enough if you also add social proof, like product reviews. You can even use the product reviews of the suppliers. The reviews do not necessarily have to come from real sales.
Affiliate marketing does not work this way. It is much harder. As an affiliate marketer, you must show your face. People will only trust you if they can see you.
In addition, you must make a lot of content that people find beneficial. You will have to publish hundreds of videos on YouTube before you gain this level of credibility.
4. Scalability of the Business
Between the two, I can say that dropshipping is much easier to scale. Below are some ways to scale a dropshipping business.
- Optimize your existing products.
- Expand your product list or catalog.
- Offer your products to other markets.
- Plan and execute other marketing tactics.
While you can do the same for affiliate marketing, you really are stuck with offering products within the boundaries of your niche. For example, if you do ghost commerce for Amazon products, all your content and audiences must revolve around Amazon products.
Dropshipping is easier to scale. For example, you can target Asia after making enough sales in North America. If you are in the toy niche, you can add more modern toys. Or, you can add another election where you sell toys for middle school kids, not just those in primary school.
You can do product bundles, upsells, cross-sells, and product drops. There are so many things you can do in your marketing plan and strategy to scale up. These are things you cannot do in ghost commerce as an affiliate marketer.
5. Cost to Build or Start
In this regard, ghost commerce wins. Application for affiliate marketing is free. Dropshipping, on the other hand, requires money.
You cannot build a dropshipping store completely for free. You need a web host. Of all the platforms you can use, Shopify is what I recommend.
Advantages of Dropshipping Over Ghost Commerce
Dropshipping, overall, gives you more leverage and control over your business. But to put it into perspective, here are some key advantages:
- Cost to operate
- Product range
- Ownership and branding
- Marketing control
Let’s dive into each one.
1. Cost to operate
Some people would argue that it is free to be an affiliate marketer. This is true. In dropshipping, you need at least $30 monthly to operate the business.
This amount, $30, is merely your “rent” for your website or store. It does not take into account your marketing expenses. There are other things you must pay for, and all of these expenses will pile up.
What many people do not realize is that in affiliate marketing, you are spending a lot of time and effort to produce content. There is no other way to make it work. You will only make a sale in ghost commerce if you produce content.
The problem is this: you do not know if this content will fly off, or if it will be popular. The cautionary tale, all the time, is that your content will not go viral. It will be dead in the water.
On the other hand, the money you spend on ads in dropshipping directly results in sales. You can make your money back from ads. It is only a matter of creating a high-converting commercial for your product.
2. Product range
Dropshipping has a bigger product range than affiliate marketing. Today, most affiliate marketers focus on digital products because that is where the money is.
With dropshipping, you can choose a niche, and then add hundreds of products to your store. Here are some examples:
- Kitchenware and gadgets
- Electronic accessories
- Pet supplies
- Home and office décor
- Healthcare and fitness equipment
There is practically no limit to the number of products you can sell. Though I suggest that you focus on a single niche, it is really up to you if you want to build a general store.
For more information about niches, I highly recommend that you read this article: Top 15 Best Dropshipping Niches.
3. Ownership and branding
You cannot own the brand name for an affiliate product. If you do ghost commerce, people will never associate the products you sell with you or your brand.
For example, you can create a YouTube channel about building online shops and be an affiliate marketer for Shopify. People know that you do not own Shopify. In this case, they have no reason to work with you again.
The only difference you can make here is if you create an online course where you teach people to do something.
Dropshipping, however, is completely different. You can ask the suppliers to brand your products. Many suppliers can also print packaging material for you. In most cases, they can add a card, like a small “thank You” note, that carries your brand name.
4. Marketing control
Finally, you really have no control over the marketing activities of products or services that you promote. The truth is that many of them, including Shopify, do not allow you to advertise their products.
What I mean is if you are a ghost commerce affiliate marketer for Shopify, you cannot go to Google Ads to create an ad for Shopify. That activity is banned because Shopify does not want affiliate marketers making false promises.
Dropshipping, on the other hand, does not have these limitations. It is your store, your brand, so you can do whatever you want.
Why is Dropshipping a Better Choice?
In my opinion, dropshipping is a better choice because of the degree of control you have. Dropshipping offers more options in the following areas:
- Product selection
- Branding
- Unique value proposition (you can design your product)
- Shipping and target market
- Profitability
My main concern with ghost commerce, especially affiliate marketing, is that you are at the mercy of the product developers. In addition, you have no control over the commission rates.
The best example of this is the affiliate commission rate cut that Amazon did back in 2020. For a while, Amazon's commission rates peaked at 9% in 2012. Then, in 2020, they slashed this down by a third. Many affiliate marketers earned roughly a 3% commission rate.
A profitability cut like this is typical of ghost commerce. It is not going to happen in dropshipping—you are in complete control of your profits.
FAQ: Ghost VS Dropshipping
Can you make money with ghost commerce?
Yes, you can make money with ghost commerce. There are several sections, so pick one that best fits your passion.
Is ghost commerce legit?
Yes, ghost commerce is legit.
What is better, ecommerce or dropshipping?
Dropshipping is a form of e-commerce. Of all types of e-commerce and ghost commerce, dropshipping is the most practical to set up.
What is a ghost commerce?
Ghost commerce is any business where you function as a conduit or middleman between the seller and the buyer.
Summary: Ghost vs. Dropshipping
The next step I recommend is to look at dropshipping products and how much money dropshippers make. You can only do this with a tool like ours. You can sign up for our 7-day free trial to test it. Use this free offer to find winning products, and you will see why dropshipping is superior to ghost commerce!
